Should I be worried about utilization if.....

[Anonymous]

Should I be worried about utilization if I'm not going to be applying for any credit in the foreseeable future? Just a little background, about 9 years ago, I had 5 credit cards that I maxed out and never paid off, along with other negatives on my credit, so my scores were low. About 2 months ago, I check my scores, and they're decent! As of today, my scores are 701 EX/718 EQ/733 TU. This is so suprising because I had quite a bit of debt, but I'm guessing everything fell off. Since I checked my scores, I've gotten 2 CC's, and I'm at a total utilization of around 29%. Since I'm back in the game with CC's and decent scores, I want to keep it that way. I don't see myself going over 40% utilization, nor do I plan on applying for credit anytime soon, so I don't necessarily need the best scores. If I keep it under 40%, will my scores stay decent? 

[Anonymous]

Thresholds for utilization in the range you are talking are at 9%, 29% & 49%.  Any time you cross one of those percentages your score will increase or decrease depending on which way you cross it of course.  If you are planning on keeping utilization in the 30's (under 40% as you said) you are still 2 thresholds above ideal, and 30's by no means are considered good... perhaps "fair" at best.  You want to strive for below 9% to get to that "excellent" range where you'll realize the maximum FICO benefits.

I suggest adopting a PIF philosophy ASAP.  You've already been down the bad credit path and I'm sure don't want to chance ever getting there again.  Sooner rather than later adopt a philosophy where you use your credit cards just like debit cards... that is, you don't buy something unless you have money in your checking account to pay for it right then and there.  Always pay all of your statement balances in full.  Not only will this keep you debt-free, but it will give you the best FICO benefits as well.

As far as whether or not you should be "worried" about utilization, that's arguable.  As time goes on, lenders will start using trended data in their decisions.  This means that they'll not just be looking at your utilization at that moment in time, but rather the last 12, 24 or 30 months of your spend/payment behavior.  It's best to take this into consideration now and act accordingly.  A few cycles of utilization in the "fair" range isn't the end of the world, but if it's sustained for a long period of time it's certainly not a good look and you'll also be paying unnecessary interest as well.

[RobertEG]

The fact that high % util results in a drop in score is based on the obvious fact that high util represents statistical increase in risk of repayment.

If a consumer maintains a high % util over an extended period, that might be a trigger for the creditor to reduce the credit limit in order to reduce their risk.

If they reduce your credit limit as you pay down the balance, your % util may not be reduced by the payments.

Thus, I would worry about high util as a trigger for potential credit limit decreases......

[Anonymous]

I would worry about CLDs as well as suggested by Robert above.  I started a thread on this the other day though, as I know someone that's been at 88% aggregate utilization for at least 2-3 months, possibly 6 months now and out of their 8 credit cards their 5 major bank cards (2 Chase, 3 Capital One) are all at 93%-99% utilization. 

Neither Chase or Capital One has taken AA yet.  From what I learned in that thread that I started, as with many topics credit-related it can be very creditor-specific.  Chase and Capital One are evidently completely content with you maxing out your cards so long as you still make your payments as they are just happily collecting interest from you.  What could change this however is if you miss a payment.  The missed payment does not necessarily have to be with them, it would be something completely unrelated like a loan payment.  When that happens you immediately become a greater risk and your creditors at that point are much more likely to take AA on your credit card accounts.

[Anonymous]

Just an update. My utilization went from 7% to 33% and my EX score went down 60 points. Wasn't expecting that much of a dip.

[Anonymous]

That is quite a drop in just crossing 2 thresholds.  I would have thought you crossed at least 3 or even 4 to get that kind of drop.

[andydallas1]

Your file is far from clean, you need to be more careful than someone with a thick, clean file.  Keep your util down, treat your 'new' good credit gently,,,after a couple of years with a good history you could get by with 30% util without such a drastic score drop,,think of it like your on "probation",,keep util down and never ever miss a payment and your credit will reward you

[SouthJamaica]

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@Anonymous wrote:

Should I be worried about utilization if I'm not going to be applying for any credit in the foreseeable future? Just a little background, about 9 years ago, I had 5 credit cards that I maxed out and never paid off, along with other negatives on my credit, so my scores were low. About 2 months ago, I check my scores, and they're decent! As of today, my scores are 701 EX/718 EQ/733 TU. This is so suprising because I had quite a bit of debt, but I'm guessing everything fell off. Since I checked my scores, I've gotten 2 CC's, and I'm at a total utilization of around 29%. Since I'm back in the game with CC's and decent scores, I want to keep it that way. I don't see myself going over 40% utilization, nor do I plan on applying for credit anytime soon, so I don't necessarily need the best scores. If I keep it under 40%, will my scores stay decent? 

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1. If you want your scores to stay decent keep your overall credit utilization at 9% or better, no single card at more than 29%, and less than half of your cards reporting a balance.

2. My personal opinion is that you never know when your credit scores may come into play, so I would advise you to keep your utilization good.

3. Also it's wise in general to keep your utilization low, so that if you run into a crisis, an emergency, or any unanticipated need, you have breathing room.

[Thomas_Thumb]

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@Anonymous wrote:

That is quite a drop in just crossing 2 thresholds.  I would have thought you crossed at least 3 or even 4 to get that kind of drop.

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BBS - The large score drop syndrome is common for the thin file having fresh new credit. Truely thin files are hyper reactive and "bad" new credit behavior is treated harshly. It has been discussed in other threads.

OP should maintain utilization under 29%. Lenders generally view 30% as the upper limit for "responsible" revolving credit use.

[mitchblue]

Honestly, if you have in a recent time bad debt on multiple CC that fell off, not sure you want to go 30% now. Not for scores but you're own well being. You want to get in that trap again? Keep em low and if you don't have the cash don't buy it..